Clive Thompson on the Problem With Online Ads

Illustration: Mark Allen Miller

At first, Maciej Ceglowski looks like any other web entrepreneur. He created a clever bookmarking service, Pinboard.in, that lets you organize links, see who else has saved them, and even cache copies of entire web pages. With 20,000 users, it’s a tiny, scrappy competitor to Delicious, a long-established site recently spun off by Yahoo that does many of the same things.

But there’s one big difference: While Delicious has always been free, Ceglowski charges people roughly $9 to join Pinboard and $25 a year if they want to make cached copies of sites.

On the surface, this seems suicidal. Why charge money when your massive competitor is free? Ceglowski has a one-word answer: advertising.

Since people pay him money, he doesn’t need to run ads to “monetize” his customers’ attention. He doesn’t have to do all the things that typically ruin the experience for people—like clogging pages with distracting banners or breaking them into smaller chunks so users have to click around a lot. “It’s like a moral hazard,” he says. “Once you’re not just charging people straight up, you get into all these murky ethical things. You have to sell their eyeballs.”

As it turns out, he’s not alone. A new generation of web entrepreneurs has discovered the joys of charging users cold, hard cash. Along with Pinboard, there’s the read-it-later service Instapaper, private social-network site Ning, and innumerable iPhone apps that require you to lay down coin.

If we’re lucky, this trend will save the Internet from one of the most corrosive forces affecting it—the bloodless logic of advertising.

For years, of course, everyone has claimed that you can’t charge for anything online. If you dream up a cool new tool, your only way to make money is to generate as many impressions as possible for advertisers. This inevitably produces horrid, cynical designs that work against what people want. Consider Facebook: Each year, it redesigns its site to gradually nudge users to make more and more of their material public. This is partly because CEO Mark Zuckerberg seems to think publicness is inherently good—but it’s also a rational response to the demands of the ad market, which needs as many people looking at as many things as possible.

In contrast, charging for your service neatly aligns your desires with those of your customers (as a bonus, you can call them customers instead of users). “There’s a magical relationship you have with people who are paying you money,” says David Heinemeier Hansson, a partner at 37signals, which runs several paid web services like Basecamp. “You worry about doing what they need and request.”

Better yet, Hansson points out, paid-for services don’t need to bloat their staffs with hordes of biz-dev weasels. Hansson’s 25-person team is almost entirely programmers and designers—people who solve problems instead of spending their days trying to get users to click on ads.

As for the argument that no one will pay for anything online? That was originally driven partly by the absence of good micropayment systems. But now there are oodles—including mainstream ones like Amazon’s. Apple’s App Store opens the door to easy monthly payments, too.

Here’s how to make some money: Start a social networking service that runs on phones. Include tight, granular privacy controls, and charge $1 a month for it. Carve out a mere 1 percent of Facebook’s user base and you’ll still be making millions a month.

I predict that in 2050, we’ll look back at the first 20 years of the web and shake our heads. The craptacular design! The hallucinogenic business models! The privacy nightmares! All because entrepreneurs convinced themselves that they couldn’t do what inventors have done for centuries: Charge people a fair price for things they want.